20 March 1998 - 22 March 1998

The Political, Social and Environmental Responsibilities of Business

Chair: Sir Martin Jacomb

We met against a background of awareness that, on the one hand, the perceived power and impact of business was mounting, as the free-market capitalist model increasingly dominated the world economic scene and as freer trade flows helped build more massive international corporations;  and on the other (though perhaps as natural accompaniment) that public expectations of business behaviour seemed to be changing and broadening.  Society - its voice often mobilised or at least claimed by campaigning non-governmental organisations - more often looked “over the fence” into business activity, asking more questions than in the past about community contribution and about good-citizen-like behaviour at home and abroad.

This effect was perhaps heightened, some participants suggested, by the retreat of government from former roles as agent and service-provider (though by no means from that of regulator and transparency-demander).  This heightened demands upon the private sector;  and it occurred alongside an upsurge of public discussion of the objectives and mechanisms of corporate-governance systems.

The irreducible imperatives persisted, we knew:  to stay within the law, and to stay in business - that is, to make adequate profit and return to shareholders.  The demands of this latter were the bedrock of any hierarchy of priority among duties upon firms, and in hard times “higher” duties, like support for local arts or education, might well have to wait.  (We noted, nevertheless, that ethical standards did not become optional under stress - that might be precisely when they were most needed.)  But “legal profit” could not be adequate general shorthand for a firm’s responsibilities.  Rhetoric about the “stakeholder” concept might sometimes be overblown;  but businesses were nevertheless communities with values, and their entire operation had to be in some sense an expression of those values, needing systematic dissemination throughout the enterprise.  The first manifestation, for most firms, was in the treatment of their own employees - in concern for their quality of life and their interests as persons (respects in which expectation of flexible considerateness had already increased, at least in regard to larger firms).  The goal should be, so it was urged, that employees should feel positively that their employers were good to work for;  and on any sensible long-term view near-term costs in furthering this were not something taken away from shareholders.  That principle, most of us thought, held good even in situations - increasingly common amid changing markets and technologies - where business pressures compelled substantial severances.

Environmental impact had of course become, in all advanced countries, a major aspect of public awareness of business.  Public grasp of risk and cost, and of the need to balance them, was often imperfect, and response as customer and response as opinion-poll-answerer not always consistent;  but firms did mostly have heavier duties than had been acknowledged in the past, and meeting them had to be seen as an integral part of doing business.  Several of us argued for a more pro-active role for business in shaping standards and regulations - after all, business best knew its own technology - rather than being a passive or even resistant receiver of demands from others.  And it was noted that business’s own creativity had often confounded the gloomier predictions of the economic burdens environmental constraint would impose.

It was less easy to identify clear precepts for what business ought to do in wider matters of philanthropy, such as encouragement of the arts.  The commercial case for activity seemed well established by the near-universal perception among larger firms - evinced by their actions - that it was good for image and so, in the long run, for business;  but there was the further consideration that to operate amid thriving and self-confident communities must in itself be of real commercial benefit.  We observed, in this regard, that most businesses were by their nature rich repositories of talent and skills;  and making this resource available (or encouraging it to make itself available) for community purposes was one of the biggest subventions business could confer - again, often with useful spin-off to itself.

The going got tougher as we turned to the international arena and to the diverse range of national conditions, practices and competences to be found there.  Living though we might be in an increasingly boundary-less world, national polities and national cultures remained key realities;  and we heard a vigorous plea against seeking to impose our own patterns uniformly across the world.  Countries in different settings and at different stages of development had different norms, and might legitimately or even necessarily strike different cost/risk/benefit balances in such matters as labour standards.  That said, multinational companies should properly view themselves as exemplars and purveyors of their own values even if not imposers of them;  especially in weak socio-economic environments the setting of example was a valid long-term contribution.  Businesses should not lower their standards just because local systems could not insist on higher ones;  and it might indeed be downright arrogant to assume, for example, that a developing country could not manage without corruption.

We wrestled with how far companies ought to make external political judgements on their own account, rather than simply conform fully and readily with guidance from their governments (which we mostly thought was the right way to deal with the thorny question of arms sales).  We were clear that anything smacking of interference in political process overseas was neither proper nor wise.  We were less sure whether any clear general rule could be discussed about the merits or otherwise of boycott or withdrawal - themselves uses of power - on political as distinct from commercially-prudent grounds.  Business involvement in a disagreeable political environment had inevitably some political significance, but whether the disadvantages of this outweighed those of abandoning the attempt at constructive engagement, and perhaps of further penalising disadvantaged populations, probably had to be weighed case by case.

There was wide approval of the desire to establish standards on an international basis wherever possible, as for example in the convention on the prevention of bribery recently agreed by members of the Organisation for Economic Cooperation and Development.  Concordats of this kind, if properly monitored and enforced (not always easy matters), could progressively improve local practice and at the same time ease “prisoner’s dilemma” problems for external firms anxious to behave well yet still do business.  The shaping, through the World Trading Organisation or otherwise, of international agreements on what was proper business behaviour ought in general to be a strong business interest, though we recognised that sometimes the countries that signed up to agreements with greatest alacrity might include those with least genuine will or ability to ensure their observance.  Nevertheless, the very fact of international concordat might over time exert useful pressure even in unpromising environments.

There ran through this and indeed almost every phase of our discussion an underlying conceptual issue : were the responsibilities of firms all reducible ultimately to considerations of long-term interest (including interest in sustaining and enhancing public reputation - properly a major concern, this, not least as an attraction to good employees) or were there imperatives that stood apart from and above any calculation of interest - things that simply must be done, or not done, irrespective of commercial repercussion?  We reached no conclusive view;  but most participants believed that if firms took a truly broad view of interest the real-life difference mostly narrowed to vanishing point.  And even where firms had to operate abroad amid conditions that would be judged intolerable at home - for example in respect of child labour - instant ethical absolutism was not necessarily the right course;  "to face in the right direction and keep moving”, as one voice suggested, might be the path of practical morality.

Were special responsibilities owed to customers?  Of course - in the end, the market had to rule - though awkward issues might just occasionally arise about whether every customer preference ought to be met (for example where environmental or health considerations arose).  And to suppliers?  Again, of course;  but we observed that the increasing use of outsourcing might raise significant questions about supplier standards, for example in employee treatment - outsourcing ought not be used simply as a cop-out device to secure escape from in-house constraints found commercially uncomfortable.  And were there duties even to competitors?  More qualification crept in here : espionage and untruthfully-hostile advertising were wrong, as were certain sorts or styles of people-poaching;  but conventions and understandings differed between markets, and universal prescription was scarcely feasible.

The activity of business in the political field provoked lively exchange.  Business had an entirely proper agenda with government, for example on issues of regulation, taxation, competition and trade structures, and had to pursue this by whatever legitimate means were effective, including the use of lobbyists.  We were wary about whether the pursuit of business interest could in propriety or prudence go so far as seeking to influence who got elected, and it was clear that multinational corporations needed to be especially sensitive to the risks and temptations of seeking to modify political action or outcome in the less mature environments of the developing world.  Domestically, we were aware that practices were bound to differ in some degree as between Parliamentary systems (where legislation was initiated essentially by governments) and separation-of-powers ones.  Some of us perceived a fine but important distinction between securing the support of politicians as constituency-interest-defender and as funding-recipient.  Whatever was done, it seemed to many of us that transparency was a key safeguard.

Transparency - openness in declaring and explaining what business was doing in matters of public concern - was indeed another pervasive theme in our discussion, alongside its natural partner, accountability.  We touched briefly upon ideas that companies should subject themselves to some sort of “social audit” (though who was to decide what the criteria for that might be?)  Expectations of disclosure, for example in annual reports, were becoming increasingly extensive;  some were burdensome (especially for smaller businesses) and some were not, but in the former category it seemed clearly right that they should rest on regulation rather than voluntarism, for equity among competitors.

There was much commendation of the value of candid dialogue with external interests concerned with business impact, such as campaigning non-governmental organisations (and, naturally, the media).  NGOs were themselves of uneven quality, and their own accountability, openness and willingness to share in difficult responsibilities were not always ideal;  but where there could be found interlocutors genuinely willing to engage in the search for joint understanding it was clearly worth business effort to listen and to explain.  An enhanced sense of partnership in tackling awkward issues and in clarifying real risks and inescapable trade-offs (at present often very thinly or erratically grasped by public opinion) could enhance business’s credibility and ability to influence the terms of public debate - and indeed, through the discipline of timely challenge, to improve its own decision-making.

We found perhaps too little time to consider the efficacy of mainstream lines of corporate accountability. In principle, no doubt, the annual general meeting of shareholders should be the prime focus;  but few seemed to regard the current actuality of AGMs (too often marked, at least in Britain,  primarily by the shrill voices of individual grievance or single-issue lobbying) as truly salutary in holding boards to account.  It was suggested that institutional shareholders - some of them, maybe, overconstrained at present by legal limits on their purview? - should somehow be stimulated to take (and equip themselves for) a more active interest in wider and longer-term issues affecting the corporation.

One or two of us wondered, as our conference drew to a close, whether we had sufficiently tackled awkwardly high-profile (if ultimately secondary) public issues like remuneration levels which popular sentiment found it hard to accept as socially appropriate.  But more fundamentally, we were reminded that in our societies successful business was a major good, and indeed a condition of most other goods;  that it should not be too readily asked, to the distortion of its proper contribution, to serve goals which fitted neither its functions nor its skills;  and that a degree of tension in its relationships with those primarily concerned with such other goals was natural and indeed healthy.  The first requirement of good business, in the service of all, remained to be good business.

This report reflects the Director’s personal impressions of the conference. No participant is in any way committed to its content or expression.

Chairman: Sir Martin Jacomb
Chairman, Prudential Corporation plc


Ms Giselle Hantz
Associate, Latin America Group, Debevoise & Plimpton, London

Professor Robert O’Neill
Fellow, All Souls College, Oxford;  a Director, Shell Transport and Trading Company Limited

Mr James C Baillie
Senior Partner, Tory, Tory, Deslauriers & Binnington, Toronto

Monsieur François Lagrange
President, Patent Office, Paris;  Managing Director, European Investment Fund, 1994-97

Professor Graham Ashworth CBE DL
Chairman of Co-ordinating Committee, Going for Green;  President, Foundation for Environmental Education in Europe
Mr Robert Ayling
Chief Executive, British Airways plc
Mr Peter Bottomley MP
Formerly Parliamentary Under Secretary of State, Departments of Employment and Transport and Northern Ireland Office
The Rt Hon Virginia Bottomley JP MP
Formerly Secretary of State for Health and for National Heritage
Mr Tony Davies
Director, Group Risk Management, Lloyds TSB Group plc
Mrs Joanna Foster
Chair, The BT Forum;  Trustee, Employment Policy Institute
The Rt Reverend Richard Harries
Bishop of Oxford
Sir Robert Horton
Chairman, Railtrack
Lord Levene of Portsoken KBE JP
Senior Adviser, Morgan Stanley & Company International Limited
Mr Anthony Loehnis CMG
Director, J Rothschild International Assurance Holdings plc
Reverend Professor Jack Mahoney SJ
Dixons Professor of Business Ethics and Social Responsibility, London Business School
Mrs Barbara McPhail
Executive Director, External Affairs, Going for Green
Dr Mark Moody-Stuart
Group Managing Director, Royal Dutch Shell Group
Mr Michael Scholar CB
Permanent Secretary, Department of Trade and Industry
Mr Stefan Stern
Spokesman, The Industrial Society
Ms Sophie Tickell
Senior Policy Adviser, OXFAM
Mr Gerry Wade
Partner, Bruce Naughton Wade
Mr Charles Wookey
Assistant for Public Affairs to Cardinal Basil Hume
Mr Robert M Worcester
Chairman, Market Opinion and Research International

Ms Kjestine M Anderson
General Manager, Public Relations and Advertising, Texaco Inc
Mr Robert O Bothwell
President, National Committee for Responsive Philanthropy
Ms Linda Chavez
President, Center for Equal Opportunity, Washington DC
Ms Anne T Dowling
President, Texaco Foundation
Mr John C Gore
Director, External Affairs, BP Group
Mr Martin J Rosen
President, The Trust for Public Land, San Francisco
Mr Peter Shiras
Senior Vice-President for Programs, Independent Sector
Ms Maureen S Steinbruner
President, Center for National Policy, Washington DC